I upgraded a few weeks ago, but I was seriously limited in what I was prepared to pay for a WinBox. My main machines are Apple, and the Windows machine is just for fun (and not a whole lot of time for that either, so no point spending huge amounts for a killer machine that gets used a few hours a week).
I just baught a budget Acer box from chain electronics store:
Acer E380 - AMD 4800+ dual-core Athlon 64x2 (2.5GHz, 512MB cache per core)
2Gb DDR2 RAM, 400GB SATA HDD, dual-layer 8x DVD/CD burner
The machine has onboard NVidia graphics, but it has a 300Watt power supply, so I stuck a PNY GeForce 8500GT 512MB PCIe card in it instead. Then I replace my old 17inch CRT with a 21.6inch wide screen SamSung (216BW). The whole thing was less then $1000 US, and it runs SHIV just fine (unless you are a FPS snob

).
The GeForce 8800 would have required a power supply upgrade, and that card alone would have been 1/3rd to 1/2 the cost of the whole bundle I brought home, so too expensive for my taste or needs.
I'm running Vista Home Premium 32-bit, and have had no real issues. Just follow the advice here about installing your games ANYWHERE but "program files" (mine are in my user's area in a "games" top directory - this bypasses Vista's whole insanely applied user access control security "feature"). Some older games just won't work with Vista's graphics changes (Jane's USAF, some real oldies like Fighting Steel, DID's F22), but other's are alright (Janes WWII Fighters, for example) although you may need to download and install DirectX9 (or get it off an old game CD - it can run happily alongside DirectX10 on Vista).
Figure out how much you want to spend first, then you'll know what ballpark you're in for combination of CPU/RAM/Video card.
P.S. in hindsight, I do wish Acer had used the older version of AMD's 4800+ chip - the 2.4GHz chip has 1GB cache per core, which seems a better trade off then 2.5GHz and 512MB/core. Although, for all I know, you just cannot get the 2.4GHz version anymore?